Nickerson v. Stone Bridge Life Insurance Company: Good excuse for a detour on punitive damages and other issues

Justice Leondra Kruger probably made a sensible ruling in this case, which amounts to a pretty mundane issue.  Indeed, if public officials were engaged in work which is proper to government, their lives would normally be very uninteresting.  However, the legal background underlying this decision is much more interesting.

Facts:  Nickerson is a veteran.  He is entitled to full medical benefits, which appears to have been provided by Stone Bridge Life Insurance Company.  He is a paraplegic, paralyzed from the waist up, etc.  He was injured severely on February 11, 2008.  He was admitted to the hospital, and for some reason stayed there for over 100 days.  He filled out a request for coverage and was denied for all fees incurred after January 29, 2008, since none of those fees were considered necessary medical expenses, in accordance with his policy, and received a bill in addition.  Nickerson sued Stone Bridge not only for breach of contract, but also for torts (bad acts).  On the tort claims, the jury awarded $35,000 in compensatory damages, found the insurance company engaged in fraud,  and awarded 19 million in punitive damages.  Several things.  Why did this case go to trial?  Why couldn't the insurance company settle the dispute?  Why did the jury award damages for tort claims when this seems to be a simple contract dispute?  The court, under stipulation by both parties, decided an amount to compensate the victim for attorney fees under Brandt.  

Insurance company appealed on the basis of Gore and other precedents, that the punitive damage award was excessive.   The appellate court agreed, reduced the award to $350,000, ten times compensatory damages, and gave Nickerson the option to accept or to hold a new trial.  Amazingly, Nickerson rejected the court's offer.  What is he doing by rejecting the offer?  How much time and money was wasted on this nonsensical argument before the supreme court? Several issues were presented to the Supreme Court, the only one that they considered in this particular case, is whether the Brandt award should have been considered in applying the Gore test, to remit the extent of punitive damages.   The court decided that it should consider the Brandt amount, and remanded to the Court of Appeals to adjust the punitive figure accordingly. 

In case you did not know, the Supreme Court case of BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, held that punitive damage awards are subject to scrutiny under the due process clause of the Fourteenth Amendment, and can be set aside if excessive.  Related cases have identified three factors to decide whether this is excessive.  These are:  (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases."  

In my view, this is a mistake and a major miscarriage of justice.  Many disagreements can be found in a particular case as to whether the punishment is just, but to state that big businesses (and Gore was a case which gave special treatment to big business) should be protected by government, from large awards on the basis of due process, on the idea that the company lacks notice of the extent of punishment, is absurd.   Parties must be responsible for their actions, period.  To impose such a rigid view of the appropriateness of a punitive damage award is anathema to this process.  The fact is that every case is unique and needs to be judged on its own merits.  In a properly functioning trial, the facts should speak for themselves.  The idea that no punitive damage award should be over ten times the compensatory damage award is absurd, because just as there is no limit to the extent of profit companies can achieve if left alone, there is no limit to the extent of harm wrongdoers, acting irrationally, can inflict upon their victims. Punitive damages are designed to deter conduct, whatever is necessary to do so given the facts, is necessary.  A is A.   It should not matter that one company was only fined 50 dollars for the same conduct.  Companies can and have gotten away with egregious abuses, and now have a partial sanction from the government to continue doing so with limited consequences.  Companies, with the sanction of government, can continue to harm people, and write off the consequences of their harm as a cost of doing business.  In a properly functioning society, the court system will impose harsh consequences against wrongdoers, and have no regulations, which govern business before any wrongdoing has occurred.  Limiting the extent of punishment for wrongdoing and maximizing the extent of regulation is a painful, obvious, and unacceptable inversion.    In one consideration of the punitive damage awards under the Gore test, you will notice that the court must consider the government-imposed fines and sanctions for similar behavior,  therefore, encouraging society to enact more regulation, and engage in less litigation.  It should not be government's job to impose arbitrary punishments and regulation, but to run effective court systems to deter harmful conduct.  

Just as profit is and should be a great motivator to entrepreneurs, the possibility of large damage awards ought to encourage plaintiff's attorneys to fight for justice.  If the maximum fee for which the attorney can aspire is limited, what is left to motivate him to continue fighting for justice?  Plaintiff's attorney work might be the most dehumanizing, awful of all occupations, and eliminating that potential pot of gold at the end of the rainbow will have deleterious effects on the pursuit of justice for poor people, whom politicians seem to care most about.